Utterly Disgusted With My Luck In Stock Market

Not going to make this into a ranting and whining session, just laying out the facts. Aside from picking Fly's losers and missing out the winners, and not able to participate TraderFlorida's elusive timing on AAPL, my own swing trades haven't been working either.  $BPCOMPQ has been on sell signal for the past 5 days, and for once I told myself I am going to take it religiously, especially with Buydonthold.com also flashing sell signal at the same time.  Even Fly is hedging his longs with VXX.  So I accumulated SDS -- bear ETF on SPY.

Yet, the market loved to fade me.  SPY moved up over 4% today!!

While my long time social networking losers took their post earning plunges in the the past 2 days,  to the tune of (-40%) for ZNGA and for FB, (-12%) on top of the (-8.5%) sympathy drop on ZNGA's disappointment a day earlier.

And for FB, (-12%) on top of the (-8.5%) sympathy drop on ZNGA's disappointment a day earlier.

Missing bandwagons, taking profits too early, holding on to losers, stopped out at low of day, big loser positions, tiny wind fall positions, and market rallying while your position suffer.  One would never be happy in stock market. Even the legendary Jesse Livermore bankrupted a couple of times, got tired of fighting the market, and ended up killing himself.  Enough is enough.

These Are Trying Times

I am not talking about the recession, the European debt crisis, or the massacre 2 nights ago at the Dark Knight premier in Colorado.  I am talking about my own personal life.  It is amazing how my world has been crumbling down within just the last 10 days.

10 days ago, my father had colonoscopy and is being scheduled for surgery.

My mother had her colonoscopy a week later on Wednesday, and had already had surgery in the ER and is being hospitalized.

I've been negotiating salary on a new position. On Thursday I received a phone call which outright turned down my request, not even meeting me somewhere in the middle.

Even for small things I've been having bad breaks.  On Friday my car had the annual state inspection done at Firestone, all was fine except for a bad braking light.  I wanted to change the light bulb myself, but the service rep threatened that I'd be assessed a $12 re-inspection fee.  So I paid $15 to have the little bulb put in.  I found out a few hours later that for obvious checks such as braking light, there should be no re-inspection fees if done within 5 to 30 days in just about all garages, including Firestone.  The dishonesty was depressing.

Just yesterday (Saturday), I received a letter from one of my banks notifying a $20 service charge for a failed deposit.  The reason indicated was "unable to locate account".  I subsequently found out that the account number on my own check from another bank was misprinted.  An 8 was misprinted as 3.  How often does thing like this happen, and one top of my bad breaks?!

My church is breaking down also.  The pastor has been financially abusive, disputing with the board, and has gone on an unannounced, 6 week vacation overseas.

Trading isn't helping either. I am more and more convinced that the stock market may be the one place where God and Satan stand on the same side.  Especially in light of everything else that had happened,  I am taking an indefinite break on day-trading.

AEM - Too Bad

AEM up over 8% today, on the verge to breakout of the cup with handle structure.  I posted a long set up mid-May.  It was a nice setup, but too bad it fell victim of a shake-out.   See circled area.  I wonder how many trader (not investors who simply rely on "hope") were able to withstand and not waver.  Too bad for me, AEM snapped back with fury since and I could not bring myself to chase after it.  Such is life.

Be Slow to Take Profit

Be slow to take profit and quick to take loss.  Well, that's one of the trading adages.  Supposedly, if one heeds the adage, even if one is only right 3 out of 10, he can still make a small fortune. We tend to do the opposite: take profits too quickly and sit on losses too long.  Aside from fear and greed at work, for me jinx make it especially hard to execute.  Think about it.  Why did we condition ourselves to do the opposite?  Well, easy, empirical data by way of experience. Once we see the profit turns into loss once too many times, we begin to take profit early.    Now the whole thing is a big topic, so I am just going to focus on a small facet of it.

I am usually very quick at taking profits.  But this time I said to myself, I am going to be patient and ride on my winner -- shorting AAPL at a good entry of just below 560 (see first yellow arrow).   The whole morning I had several opportunity to take profit, but I held my urge.  Every time the green dissipated, it was painful.  But I said to myself, no pain no gain;  this is what one needed to go through to get bigger gain.

Now the horizontal resistance was finally breached.  Guess what?  TraderFlorida, the AAPL guru, actually talked down about the volume, or the lack of it as usual.  So I actually added to my short position when it went up again because I don't see volume confirmation and the price could be just running on fumes.  Then it actually popped out of the rising channel, WITH VOLUME!   I finally bailed, successfully in turning a profit into a loss.

Lessons learned:

1. Own your own trade.  Listening to others will only confuse yourself.
2. Never let a winning trade turn into a losing trade, even if it means exit at breakeven and lose the profit.
3. The adage does not account for how often the draw-down exceeds cost before the target is reached.
4. Jinx is well and alive. All the pain endured didn't pay off.

Market Musing & Targets

Since the 2011 October bottom, the false leading indicator I subscribed to for the exact 6 deadly month had been advising short-selling the market.  Along the grueling 6 month journey, there were a few double tops which re-kindled the hope that the market was finally heading back down.  See the circled areas.  You can see how already-up-to-my-chin I was near the "top" at the end of February (see Market Has Made Up Its Mind).  In retrospect, the market was only 2/3 done!  But look at the weak volume at the beginning of March -- surely felt like the market top!!!  The market being at its best, finally flash out the final double top a month later (the first rectangle on the chart).  But by then, I've been bruised all over and lost the will to fight the market.  I held only laughable number of shares of bear ETF's (VXX, SPXU, SDS, TZA, SH), and by the time the market retraced 23.60% of the bull run (shown as 76.40 Fib on chart), I've sold out of my last bear shares and actually started accumulating some longs.   Now the market is indeed in the "never look back" mode that I was looking for 2 months earlier and void of any bounces on its way down.

Today's 1.4% selloff reached 76.40% Fib of the rectangle target.  From experience, it should bounce before proceeding to the target of 129.31 area, which happens to coincide with the 129.42 horizontal support. It would make sense to back-test the 200 day EMA (magenta line), especially with tomorrow being the historical FB IPO.

Speaking of the FB IPO, it's only intuitive to think that it would "hype" up the market, based on the past experience: the more IPO's the higher the market goes, and the high the market goes, the more IPO's, etc.  They feed off each other.  However, the shear size of the FB IPO, which will be the largest ever (surpassing V - Visa), introduced a new concept -- that funds would sell other stocks to raise cash in order to jump onto the FB bandwagon.   So the market sold off.   Market just never ceases to amaze me -- and has never been willing to drop its snobbery and accept me as friend.

UPDATE: With all that blood on the Street today, my IRA was down a mere .09%.  Thanks to holdings such as TLT, PEP, HNZ, JNJ, and for today only, CEF, to help offset losses in other issues.

Getting Burned From The PNRA-CMG Pair Trade

My luck ran out on the PNRA-CMG pair trading today.  Not sure why such discrepancy in the price movement between the two today.  PNRA down 4% while CMG only down 2%.  You can guess which one I am short and which one I am long!  May be it has something to do with the options expiration tomorrow?  Just in case it's the case, I am going to hold both positions till next week.  Regardless, the lesson is that nothing is safe from disaster, and you have to be prepared.  Second lesson:  I'm still cursed and my trades are still jinxed!

Patience - Which Line Are You Waiting?

In the same post yesterday, The Fly also stated

"I am tempted to cut losses on a few ideas; but then I remember the reasons why I own them. Sometimes it pays to be patient. Other times patience is a waiting line for execution."

That spoke volume of much of my pent up emotion.  In my case it's always the latter.  As I've always been accused for lacking patience by my wife, and I agreed, and vowed to be patient this time around.  What I didn't realize was that I'd been [patiently] waiting in line for execution!

This may sound like a broken record, but hey I am doing my own psycho therapy here.  I had good reason to have faith in this proprietary leading indicator and started paying for it last October.  Take a look at this now infamous chart:

The PI indicated nothing but down since Oct 2011 while the market had its best performance since the dot com era of 1998!  And for 6 months I practiced my unprecedented "patience".   By any standard, I've done my part as far as putting in effort to be patient.  It's just not meant to be.  Damn you, jinx!  And thanks to you, Mr. Bernanke, for the Operation Twist.

Conceding Defeat

Today marked a milestone.  It's a giant failure by my bearish positions held over the course of the past 6 months, unfortunately coinciding with one of the stock market's most violent rallies.

The $BPCOMPQ index, which showed the first sell signal over the past many months, has flashed a buy signal after today's close.

Dr. Fly gave up his VXX positions today for a whopping 17% loss, and went long a few stocks.

Buyanddonthold.com withdrew its sell signal, just short of iterating a buy signal.

End of the month and end of the quarter window dressing are just around the corner.

It's over for the bears.

I am disgusted by the market and its relentless bullying on the bears.

I am disgusted by the politicians and their cronies with their election year maneuvers.

I am disgusted by the insatiable greed of the financial institutions.

I resent all the turns of events that brought about today's defeat.  The biggest culprit of all is this proprietary leading indicator that I subscribe to.

It worked miracles in forecasting trends, market tops and bottoms even during QE's .  Its inventor demonstrated his mastery of zen in obeying the indicator with total faith, even as he was being ridiculed in the forum.  But every single time, he was right IN THE END, and its followers were amazed.   Came Oct 1st, he began charging subscription fees just as I became a believer myself of his leading indicator and his style of total faith trading (euphemism for no stop loss).  Almost to the dime, he jinxed the leading indicator and jumped the shark.  The stock market and his leading indicator literally have gone orthogonal ever since. But this was the hindsight.

For the first time I was fearless in going short.  For the first time stop loss was not a consideration.  And for the first time, I got run over head-on by the market's runaway freight train with no recourse, as I modeled after the master's zen.  The most damning aspect of the proprietary leading indicator as it went orthogonal with the market was that it made me discount the long hedges and amplifies the bearish arguments, AND it made me think "tomorrow may be the doom's day" every single day that it was wrong in the past few months.

To add insult to injury, just as I was about to give up my faith in February, Dr. Fly, who had a stellar 17% YTD return, sold all longs and bought VXX and TZA.  Many bulls also turned bears in this time frame.   I was raised from the dead and continued my quest as a bear (per the leading indicator, mind you).  Instead of taking losses in SPXU and SDS, I started positions in VXX.   As aforementioned, it turned out to be a 17% disaster.

Then over 2 weeks ago, the most trustworthy $BPCOMPQ finally flashed a sell indicator, as did buyanddonthold.com.  I was once again hopeful and decided to withstand the pain a bit longer.  But these signals all got taken away today!

I will begin taking my loss 1/3 at a time.  And then I will cease to hold overnight positions for sometime to come.  The last thing I need should I find myself exiting at the top is to find myself bagholding for the bulls.  The bulls are not on firm grounds, but I am tired of fighting.  Here's the 60 minute SPY chart.

After I liberate myself, I vow I will never short the market (SPY, SPXU, SH, SDS) again --  I will short sector funds instead.  I am disgusted by such ploy as sector rotation.  It's a scam.

Mean Reversion

One of the trading styles is based on reversion to the mean, where oscillators reign supreme.  Prices don't go one way up or down but always go up and down, revisiting the mean.  Hence you have technical indicators such as STO, Bollinger Bands, etc.  Well, I believe there is mean reversion within an individual trader as well.

Don't tell me you don't follow any particular good trader(s).  Even if just for fun, we all do. I follow Dr. Fly because his blog is amusing to read and he posts his positions for all to see, even if it means making a fool of himself.  And he manages real money in the millions, albeit mostly other people's money.

Through February, his year-to-date return was north of 17%.  So I took his trades even more seriously. Although he's mostly in cash, since then most of his odd trades have been bomb shells after another, with the exception to TIF:  VXX, CPST, ALJ, and yesterday, QCOR.   Being bearish since last summer, of course I got more aggressive on VXX than I otherwise would, with Dr. Fly onboard.  CPST was in my IRA way before he got in.  And QCOR which he bought yesterday, is down over 6% overnight due to earnings.   At this rate, his year-to-date return will revert to mean, say, 7%, just for argument's sake.  And I would participate his demise in the process by following him. Even for a token trade, a 6% down in less than 1 day is still painful.

     

So if Dr. Fly has been too hot and the mean reversion argument is valid, then why don't I stop following his trades for a while?  Well, that was what I was thinking back in January when he was having a 7% year-to-date return in mere 3 weeks since the New Year.  Too hot to follow?  He's apparently made another 10% return in the next month.

This experience also illustrate another trading phenomenon, bagholding.   That's a sucker behavior.  That's when you don't get in because you have doubts, are afraid, and have little faith.  It's not until a miracle (e.g. a parabolic move) is shown to you do you become a believer and finally get in.  But by then, you got in with the dumb money and became a bagholder, as all the buyers have left the trade.  Sometimes when I am in a state of denial, I'd attribute this to the art of jinx. LOL.

I am writing this pointless musing as the market continues to froth higher.  SPY is up .6%, 20 cents from making a new high, while I continue to hold inverse ETF's.

UPDATE: Dr. Fly's new post, validating my claims.

I’m sorry but something is really ripping apart my brains here.
POOF!
That was me doing %$#@ magic, making lots of money disappear, vanish into thin air like accountability when blogging.
As you can see by the swagger in my penmanship, I am getting cartoon raped in QCOR, ALJ, TZA and VXX today, while making a SINGULAR penny in CPST and nothing at all in TIF. All of this, despite my big, bountiful, and handsome, cash “hoard” has me sitting in the great big, tall grass, off by 1.25% for the day...

Market Is So Easy

It's so easy for me to lose money in the market when jinx is with me the whole time.  The proprietary leading indicator I subscribe to has been advising to short the market since May 2011 and still is.  So I lose while everyone who doesn't watch the market gets a free ride.  Professional money managers like Dr. Fly reaped 20% during just the first month and a half of this year so far going long the frothy stocks.  Now that he's in cash and holding just some VXX.  I followed suit with VXX because that's in line with my gut and my technical analysis up till yesterday.  It all changed today.  VXX so far down 5.40% with the market (SPY) up only .28%.   Going VXX is worse than averaging down on the leveraged index ETF (SPXU), and I am in it!!!  Talk about jinx.  Now Dr. Fly has 20% cushion to burn, but not me.  For me it's been just one direction -- down.   The market is so easy:  until I overcome the jinx, just follow me and do the exact opposite!

LPSN - The Jinx Ain't Over

Aside from exiting obscenely early during pre-market and missing out on the 20% pop, my day trade with LPSN also bumped into another fluke.  I had a stop order to short at 14.99, and it got filled at 14.76!  Off the bat I was down 1.5%!!  I had to do the damage control during the next hour.  Ugh!  I'd better sit on my hands for the rest of the day!  Meanwhile I need a lot of sympathy on this Valentine's Day.

How to Toss Away a 20% Profit?

I had previously sold LPSN for a profit at the upper trend line of the triangle, and held the remaining through earnings last night.  The strangest thing happened which I have never seen before:  the after hours trades showed little activity after earnings and it was down a bit.  Even the premarket this morning had very thin volume and up approximately 4%.  Meanwhile the futures were down for the broad market, and a red gap was a certainty.  I didn't see any bid, so I place an order to exit at the upper trend line of the triangle.  Oddly, it was filled immediately.  Minutes later, the market opened and the price shot up 6% with huge volume.  The volume and the rally was nonstop for the next 20 minutes and went as high as 21.92% !!

Needless to say, I felt sick in my stomach.  It is also embarrassing.  Nevertheless, I post the lesson here any way just for those who can benefit.

Lessons:

1. Avoid off-hour trading; spend time with family instead. If you think market can be manipulated, it's even more treacherous during off hours. 
2. Something divine, a.k.a. jinx, is definitely intervening with my trades.  This fluke was a perfect example.

Another Reason I Don't Like Hedging

I was (and still am) disgustingly short the market, so I went long intraday on SINA.   Think that while I sucked wind on my swing short positions, I might as well go long on SINA and "ease some pain."   I must have the worst luck possible, the hedge went terribly wrong.

SPY barely changed while SINA plunged 4.5% since my entry around noon time.  This is beyond funny!

In other words, not only does hedging reduce my potential profits when things go as planned, but when things go wrong I would be double-whammied like what just happened today!